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Cutting red tape could add $26bn to Vietnam GDP: expert

Cutting red tape could add $26bn to Vietnam GDP: expert

Thursday, June 05, 2014, 14:13 GMT+7

Reducing the time businesses have to spend on completing tax and customs procedures by a month will help add dozens of billions dollars to Vietnam’s gross domestic production, an economic expert from the Central Institute for Economic Management (CIEM) said at a conference on Wednesday.

The event was held in Hanoi by the Ministry of Planning and Investment, which manages CIEM, in a bid to solicit solutions to improve the Vietnamese business environment and increase the country’s competiveness.

“Vietnam says it makes progress in improving the business environment every year, because it always compares the improvement to its own,” CIEM acting head Nguyen Dinh Cung said.

“But the country only ranks 99 out of 185 nations and territories in the 2013 World Bank Doing Business report,” he added.

Vietnam even stood behind Zambia, Rwanda, Belarus and Ghana in terms of business environment.

“Vietnam revolved around poor rankings over the last few years, while many countries have enjoyed successful administrative reforms,” the economist said.

It currently takes businesses 22 days to have customs cleared for their exports in Vietnam. If the duration could be cut to only seven days, Vietnam’s GDP will increase by US$11 billion, Cung said.

Similarly, if the time to complete import procedures is reduced to seven days from the current 21 days, another $15 billion will be added to the GDP.

“Hence, the GDP can expand by about $26 billion only by reducing the export-import red tape by 29 days,” he concluded.

Citing the 2014 World Bank Doing Business report, Phan Vinh Quang, an expert from the U.S. Agency for International Development (USAID), said Vietnam is requesting that businesses declare and pay taxes 32 times a year, which consumes 872 hours a year, or 100 working days for taxpayers.

The average for businesses in the Asia Pacific, meanwhile, is four times shorter, only 208 hours a year.

Quang said it takes businesses in Vietnam much more time to declare and pay taxes because they are required to submit very detailed tax files.

Moreover, Vietnam asks businesses to pay their value-added taxes 12 times a year, something businesses in Thailand only have to do once a year.

While Malaysia requires only four kinds of papers to complete import procedures, the number in Vietnam is eight, he added.

“Vietnam has had some tax procedure reforms but it is still a long road ahead for them to keep pace with ASEAN countries such as Thailand and Malaysia,” he commented.

Hoang Thi Lan Anh, deputy head of the committee responsible for the modernization and restructuring of tax procedures under the General Department of Taxation, said Vietnam has made progress in cutting the tax time.

Businesses had to spend 1,050 hours a year paying taxes a few years ago, Anh said.

But Anh admitted that the reduced time is not satisfactory enough.

Cung, from the CIEM, said the government’s Resolution No.19 has approved many objectives in cutting tax-related red tape, but what matters is whether “relevant ministries are determined to get things done.”

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